4

I'm aware of a provision in the ABA model rules for lawyers starting:

A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.

If I engage a lawyer to collect lets say $100,000 in trust distributions owed me, is there a % (percentage) guideline as to what would be considered an "unreasonable fee"? How about for "reasonable"?

I'm not talking about a contingency percentage, but bills for hourly work...

  • How could "bills for hourly work" be guestimated by anyone here? It all depends on what it takes to recover the distributions. – BlueDogRanch Nov 6 '18 at 23:22
  • I'm not sure it is possible to answer, but I'm wondering fi there are guidelines. In some cases where I've found court's rule on what on what "reasonable fees" are, the amounts seems small, even if the billed hours was large. – Burt_Harris Nov 7 '18 at 0:30
1

What @bdb484 is describing is called the "lodestar" which is the starting point for any reasonableness determination. If the rate is reasonable and the number of hours billed is reasonable then the lodestar is presumptively reasonable. But, that is not the end of the story. Rule 1.5 lists eight factors to consider (which are not exclusive):

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

This basically incorporates the factors that go into the lodestar including the reasonableness of the hourly rate.

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

This rarely comes into play. But, basically, a lawyer can charge a premium if it creates a conflict of interest that rules out other work.

(3) the fee customarily charged in the locality for similar legal services;

This illustrates a backup way to check if the lodestar is reasonable. If everyone else is charging $2000 to do an estate plan with a couple of trusts, and you are charging $20,000 on a hourly basis, either your hourly rate is unreasonably high, or the number of hours billed is unreasonably large.

In litigation, this means that a court may consider what the other side spent in the same case, as one factor when evaluating whether a fee is reasonable.

(4) the amount involved and the results obtained;

This is the biggest non-lodestar related factor in the list. And, it is what you are really getting at when you ask: "If I engage a lawyer to collect lets say $100,000 in trust distributions owed me, is there a % (percentage) guideline as to what would be considered an "unreasonable fee"? How about for "reasonable"?"

This factor usually acts as more of a cap than a floor. If the $100,000 of trust distributions owed to you can be obtained by writing a letter or filling out a one page form, the lodestar is going to be the maximum reasonable amount and not any percentage, although a very good result relative to the amount charged for a very small amount of time spent may justify a premium hourly rate.

But, as a rule of thumb, if an otherwise reasonable lodestar supports it, fees of as much as 33% to 50% (common contingency fee percentages in cases of varying difficulty in the contingent fee market), or even somewhat more, will usually be considered reasonable.

An even higher percentage will be considered reasonable if the client is clearly informed in advance (ideally in a written CYA letter) that it will cost a high percentage (or even more than the amount recovered) to achieve an objective at the outset. This generally happens when the client is pursuing the case for primarily non-monetary reasons.

For example, a fee of $20,000 to avoid a $1,000 traffic fine may be entirely justified if the client will lose his driver's license or his driving related job, if the offense is not beaten.

Also, this is really two separate tests. "Amount involved" justifies a high budgeted fee when it leaves some meaningful share of a recovery for the client in the usual case.

For example, if the case goes exactly as planned and the lawyer charges $90,000 on a lodestar basis to recover $100,000, when there were no non-monetary objectives on the part of the client, the fee was probably unreasonable.

"Result obtained" on one hand favors a lenient evaluation of the lodestar when the result is better than expected (e.g. when a client in a divorce gets 95% of the marital net worth, or the initially expected $100,000 trust distribution ends up leading to $1,000,000 of trust distribution instead), and on the other hand, encourages lawyers to write off their fees when the result is much worse than anticipated.

For example, suppose that the lawyer is retained to obtain a $100,000 trust distribution and agrees that this is a reasonable goal, but is only able to obtain $10,000 because the related litigation charges are surcharged against your share of the trust. And, suppose that the lawyer charged $30,000 for the services rendered, $5,000 up front and $25,000 still owing at the end of the case. In a case like that, Rule 1.5 would give the lawyer a strong reason to write off most of the remaining bill because the "results obtained" were so poor.

(5) the time limitations imposed by the client or by the circumstances;

This means that a higher hourly rate or flat fee is appropriate for rush jobs. In part, this is because more senior lawyers may often have to do work that could be done in a less rushed case by paralegals or using standard forms. Also, rush jobs interfere with a lawyer's personal life, ability to market for new clients, and ability to meet the needs of existing clients and often involve overtime pay for hourly workers. These cases also often involve long hours for the lawyers and an overtime premium is accepted to be reasonable.

(6) the nature and length of the professional relationship with the client;

This means a couple of things. One is that reasonableness should be judged by the prior course of dealings of the parties and should not deviate greatly from that without clear notice to the client.

For example, if short phone calls with the lawyer were always free in the past, it is inappropriate for the lawyer to suddenly start charging for them going forward without alerting the client to the new policy.

Similarly, a rate that might be appropriate for an arms length business transaction with a large corporation might not be appropriate for a family member needing a simple will or help with an eviction.

It also means that when a client is a credit risk, or impacts a lawyer's public reputation, or is pursuing cutting edge legal issues that require more time to get up to speed, that a premium price may be appropriate.

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

If you have lots of experience, are known as an expert in your field, or have rare skills, or went to Yale Law, or work in a prestigious law firm like a U.S. Supreme Court litigation boutique or a giant law firm that serves very big businesses, you can charge higher hourly rates.

(8) whether the fee is fixed or contingent.

If you have a contingent fee agreement, a fee relative to the work done that would be excessive in an hourly arrangement (e.g. an effective hourly rate of $5,000 an hour) is allowed because the lawyer is taking an often substantial risk of getting nothing or only a small amount, and the client is protected from ever having to pay for the lawyer out of pocket.

While not strictly addressed by this point, it is also accepted that a premium price may be charged for writing an opinion letter which is basically a guarantee that the opinion will be upheld in the end in the courts if litigated, backed by the lawyer's personal assets and malpractice policy.

| improve this answer | |
2

When you're dealing with hourly billing, it's rare for the courts to get involved in determining what is and is not reasonable. The thinking seems to be that the market is a better judge than the courts of what is reasonable, so they aren't going to object if you didn't.

When the courts do get involved, there are two primary factors to consider when evaluating reasonableness of a lawyer's fee:

  1. The hourly rate. There is no hard cap on a lawyer's hourly rate, but when courts get involved, they typically look to see how the lawyer's rate compares with those of attorneys with similar levels of experience and expertise, typically in the same geographic market. A reasonable fee for a lawyer working in Omaha fresh out of law school is going to be different than the fee for Ted Olson.
  2. The hours billed. Nor is there a hard cap on the hours a lawyer can charge. If your lawyer writes a scary enough letter, the opposing party may roll over and hand you a check for $100,000. In that case, it would probably be unreasonable to charge you for more than a few hour's worth of work. But if you take the case to trial, and then there's an appeal, and then there's a retrial, the lawyer could reasonably end up charging you for thousands of hours of work.

Between those two figures, there's so much room for variation that it's impossible to say what would be a reasonable fee for the task you're imagining, or for virtually any task. If you're in a small market and you have an easy case, a reasonable fee might be as low as $200. If you're in a large market with a complex case, the fee could easily run into the millions of dollars.

| improve this answer | |

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.